18 years. For for the first time ever, I have received the
honor of being audited :) I received the letter 2194 (SC),
form 4549, etc. for tax years 2005.
Basically, I have always done my taxes myself, the old
pencil-paper- calculator way. My 2005 taxes are very boring:
-- only W-2 income (self & spouse)
-- a small amount of interest.
-- No other income, no adjustments.
-- Only personal exemptions and itemized deductions
-- itemized deductions consist SOLELY of state taxes,
property taxes, and mortgage interest
-- ABSOLUTELY nothing else.
Per IRS, I am subject to AMT just based on high California
state taxes, and property taxes. No ISO, no option income of
any kind, no "funny" income, no other deductions, no tax
shelters. Absolutely nothing else.
Anyway, IRS was kind enough to complete the form 6251 for
me, and walking through the lines, I agree with their
calculations, so I will pay. More or less happily (I mean, I
have not cursed even once since receiving the notice, and I
can afford to pay the AMT). So, my blood pressure is not
I have a couple of questions.
1. I file my taxes in California; it goes to Fresno, CA but
the audit letter is from Andover, MA. Just curious, why is
being handled from an office across the country?
2. Letter includes name of an IRS employee "Mrs. XYZ" (it
actually says Mrs., not Ms., how quaint!), and lists contact
hours as 4:30PM to 11PM (but does not say time zone). That
is an amazingly odd hours to contact! Is IRS outsourcing the
audit job to accountants in India, sitting in Bangalore?
That would explain the odd hours!
3. The notice also includes "Failure to file / failure to
pay - IRC 6651" penalty equal to 10% of the AMT amount (IRS
otherwise agrees 100% with my tax filing; only I never did
AMT before, and they figure I needed to do it for 2005). I
DID file taxes in time, I paid in time (through payroll
deduction, and one extra payment on Jan 15, 2006). When I
filed 2005 taxes in 2006, I received a small amount of
So, is there anyway IRS will waive the penalty? Can not
including AMT form 6251 be considered a failure to file/pay?
The 10% penalty seems steep. What "magical words" should I
write in a letter, or should I utter on phone, to plead that
the penalty be waived? Based on my family's income, I CaN
NOT say that the penalty amount of less than $500 is a
hardship on me. Still, if they waive it, that's a couple
Chinese take-outs for me & my family :) So, how do I plead?
4. The letter also includes INTEREST computation, at 7%
(SEVEN!) COMPOUNDED from 4/15/06 through June, 06, and at 8%
(EIGHT!) COMPOUNDED from July, 06 through now + 30 days
(yes, all the way to next month!). Boy, where is IRS earning
that high rate of interest? Even the best online savings
account have returned between 4.5% and 5% during this time,
and the yield on US treasury's 26 week bill auctions have
been only about 5.3%. How can IRS justify charging such a
high interest rate?
Anyway to get IRS to use a more reasonable interest rate,
like 5%? Can the interest be waived, or abated, fully or
partially, under any circumstances?
5. One of the forms says "Can you pay the full amount within
120 days?" My answer is YES, and YES means no need to setup
install payment plan. Fine. But will the interest continue
to acrue during this time, if I pay within the 120 days? Or
does it mean I get 120 days, interest-free, to pay?
6. If interest continues to acrue, suppose I paid right
away, within the next 3 to 5 days (mailing time from
California to Andover, MA), will IRS refund me the excess
interest from the payment date to the next month? (They have
computed interest all the way to now + 30 days).
7. Are the interest and penalty going to be be deductible on
my taxes for 2007, when I file it in 2008? Or should these
be deducted on 2006 taxes which I will file in a month,
assuming payment was due on 4/15/06?
8. Quite unsually, all the material inside is nicely laser
printed, even the signature of the "Operations Manager,
Examinations" (boss of Mrs. XYZ listed on page 1) is scanned
image, not a real signature.
However, the whole package was mailed in an envelope, which
was HAND- ADDRESSED IN INK, in real-old-lady handwriting
style, with so much ornamentation around the serifs of
letter "R" and what not. Kind of like one of those old
archived documents from 2 century ago. I suppose some bored
old lady in mailing department at IRS, or perhaps the
auditor Mrs. XYZ herself, like to doodle on outgoing audit
Anyone else receive hand-addressed letters from IRS?
Thanks a lot for your answers, and discussions. I welcome
your suggestions, tips, guidance, and what-have-you. Even
flames welcome! (but our esteemed moderator will likely snip
Average Citizen from the Golden State